SANTA ANA — Orange County's bankruptcy recovery plan is still likely to include the seizure of state transportation tax revenue, but officials may reduce the amount they want to divert, state Sen. John R. Lewis (R-Orange) said after meeting with county officials Wednesday.

Transferring as much as $35 million annually from the Orange County Transportation Authority--about half the amount proposed in legislation vetoed Aug. 2--may become part of the bankruptcy recovery legislation discussed at the daylong meeting of state legislators, staffers and county officials, Lewis said.

"It's kind of pick and choose time," said Lewis, who acknowledged that reducing the amount of transportation tax money the county can seize means additional revenue will have to come from elsewhere. "I'm relatively confident that [transportation tax money] will be part of the solution."

County officials are also eager to secure the transportation tax funds, despite claims by OCTA officials that such a move would devastate bus service used primarily by the poor.

But Wednesday's meeting, days after Gov. Pete Wilson chastised Orange County for failing to craft a bankruptcy recovery plan, underscored the fact that state and county officials are still at odds over basic issues such as whether to repay the more than $400 million that cities and special districts lost in the financial crisis.

The county declared bankruptcy Dec. 6 after its investment pool collapsed because of former Treasurer-Tax Collector Robert L. Citron's risky investment strategy. Among the losers were schools, cities and special districts that had money invested in the pool.

The county has repaid cities and special districts 80% and schools 90% of their investments, and has pledged in a deal approved by a federal bankruptcy judge to come up with the rest.

But sources said state legislators and their staffers indicated Wednesday that they want cities and special districts--but not financially strapped schools--to forgive the remainder of the debt.

A Times Orange County survey of city officials last week showed that most are unwilling to do so, and leaders of special districts have also balked at that prospect.

Delegation representatives hinted Wednesday that they might support legislation mandating a state takeover of the county's financial affairs if the county does not make sufficient progress toward bankruptcy recovery.

But Lewis said the closed-door meeting was marked by the county's willingness to compromise.

"My sense is there seems to be some movement now by just about everybody," said Lewis, who credited the recent failure of legislation to transfer $70 million from OCTA to the county with bringing all sides a bit closer. Wilson vetoed the bill because it would have given the same authority to Los Angeles County, but said he is willing to consider its revision.

"That bill showed the Legislature is losing its patience," Lewis said. "Everybody from special districts to cities sees that now, and realizes they have to be part of crafting a solution or they may be unwillingly part of the solution."

Wednesday's closed-door meeting, part of an ongoing effort to create a legislative recovery package, was attended by Lewis, staff aides to the county's state delegates and top county officials such as Interim Chief Executive Officer Jan Mittermeier and county financial adviser Chris Varelas. A formal plan is scheduled to be presented to the Board of Supervisors at its meeting Aug. 15.

Board chairman Gaddi H. Vasquez said he believes differences between state and county officials can be ironed out.

"As with any major policy issues, there is a lot in the mix right now. There's different viewpoints," he said. "I'm confident we will work to reconcile the different views."